Surprise pick-up in house price growth defies Brexit pessimism

Average house prices across the UK increased by 0.6 per cent in August, taking the annual rate of growth to 5.6 per cent, according to the Nationwide.

“The pick up in price growth is somewhat at odds with signs that housing market activity has slowed in recent months. New buyer enquiries have softened as a result of the introduction of additional stamp duty on second homes in April and the uncertainty surrounding the EU referendum. The number of mortgages approved for house purchase fell to an 18-month low in July” explains Robert Gardner, Nationwide’s chief economist.

“However, the decline in demand appears to have been matched by weakness on the supply side of the market. Surveyors report that instructions to sell have also declined and the stock of properties on the market remains close to thirty-year lows. This helps to explain why the pace of house price growth has remained broadly stable” says Gardner.

Gardner says what happens this autumn on the demand side will be determined chiefly by the labour market and confidence amongst prospective buyers.

He warns that business surveys suggest that the manufacturing, services and construction sectors all slowed sharply in July, and, if sustained, this is likely to have a negative impact on employment and household budgets.

“Most forecasters, including the Bank of England, expect the economy to show little growth over the remainder of the year. The Monetary Policy Committee’s decision to lower interest rates from 0.5 per cent to a new low of 0.25 per cent will provide an immediate benefit to many mortgage borrowers, though for most the boost will be fairly modest” he cautions.